Mike (00:02):
Average long-term value of a client at CrossFit MASS is over $10,000. Owner Joe Venuti will dig into his amazing number with us right after this.
Chris (00:12):
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Mike (00:53):
Welcome to another edition of Two-Brain Radio. I’m your host, Mike Warkentin. Two-Brain’s top gyms know that an average client is worth 8,000 to over $11,000 long term. We call this LTV: long-term value. Joe Venuti was one of Two-Brain’s LTV leaders in November with a five-figure score. Joe, welcome to Two-Brain Radio. Are you ready to help some gym owners increase their long-term value?
Joe (01:16):
I hope so, Mike, anything I can do.
Mike (01:18):
I appreciate your time. And I’m going to get right into the first question. Many gym owners don’t even know what long-term value is. Why did you start calculating it, or how did you even find out about this number?
Joe (01:29):
Well, that number was reported to me by the crew at Two-Brain when they started breaking down the numbers I was giving to them each month in the dashboard.
Mike (01:40):
So you found out about this and found out you’re one of the leaders. What did that do for you? Did that start to change your opinion of what this number—is it a number that you’re going to continue to track? Does it mean something to you now?
Joe (01:52):
Yeah, I think so. It just means that I’m doing something right. But now that we have the number, now you want to kind of pull it apart a little bit and see if you can kind of see what makes it tick, because obviously it’s good if you’re in the group of all these fabulous Two-Brain gyms and you’re leading something, anything, that’s a positive, so we try to keep good going.
Mike (02:17):
So let’s pull it apart a little bit. And I don’t know if you’ve had a ton of time to dig into that number yet, but let’s talk a little bit about some of the things that you think might go into it. Have you done any digging already to see where that number might’ve come from?
Joe (02:28):
Yeah, a little bit, you know, so when you look at the average lifetime value calculation, it’s the ARM times the LEG of paying clients, it’s really just two factors. And I know we had a decent ARM. I know it’s not the best ever, but sometimes it peaks, you know, depending on what we’re running for specialty classes, but I knew our LEG was good. And I think we’ve always kind of worked when we look at those to bring both up in parallel.
Joe (03:00):
We never really tried to crush one or the other, one at the expense of the other. So I think we’ve always sort of incrementally over the last 12 years, sort of goosed each one up a little bit, whenever we add a new service to the gym.
Mike (03:15):
So you’ve been around for 12 years now. That’s a significant accomplishment. And one of the things that we realize, obviously for long-term value, the longer you’re around, the more value the clients that stay with you will have. Survival is one of the things that goes into being a leader of this thing, because it’d be tough to have a long-term value in your first year as a gym owner, but you’ve been around for 12 years. Do you know offhand or even just a guesstimate of how many clients are still around from the very beginning, if any?
Joe (03:48):
One of my coaches is still, two of my coaches are still with me from the first year, so they’re not clients anymore. I don’t count them amongst that. My oldest pure client just turned 10 years this month in December of 2020.
Mike (04:04):
- So that’s huge. So you’ve got some clients that have been around, we’re measuring it more in years than months then. And so that’s obviously something that’s going to be involve in that score is you have long-term clients, which is fantastic. Do you have, like is your length of engagement, is it one of those super high numbers or do you track that number closely?
Joe (04:24):
What’s a super high number, Mike, right? So I do, you know, it took me a couple of years to figure out how to pull it out of Zen Planner because of the way ZenPlanner does memberships.
Mike (04:33):
Oh, tell me about it.
Joe (04:33):
It’s a little challenging, but what’s our average length of engagement. Let me go back to get some spreadsheets here. We’re 41 months right now, the last time I updated the dashboard. So yeah, I guess that’s pretty good number. Right. And, you know, does that help?
Mike (04:56):
Yeah, it definitely does. 41 months is great considering that I think Chris has talked about the length of engagement a lot of places is, you know, clients will leave after three months, right. In a lot of gyms. Two-Brain gyms are obviously above that. So 41 months is fantastic. You said your ARM is something that you’re working on. Have you done anything specifically to change that right now? Or do you have any projects, speciality programs and things like that?
Joe (05:22):
So right now, especially programs are at a minimum because of the restrictions with the coronavirus and you know, how many people can have in the space at a time. When we got locked down, we switched everybody to one-on-one coaching via True Coach. And we continued with that when we brought everybody back in. So what’s happened is I kept all the previous members, I call them legacy members, on their current group membership costs. But now once we were back open to the public, everyone came in on a individual design type program, s so we were able to drive our revenue per member up because of the enhanced services.
Mike (06:07):
- So that’s interesting. So I’m looking here at some of the stats that Chris had in a recent blog and the length of engagement leader was 58 months. And he’s asking people to rate themselves in this blog article and he said, you get an A if you’re above 35-plus months in length of engagement. So put your number in perspective, 41 is a great number to have. And so that’s obviously going to be a great part of your long-term value score. So that’s fantastic. And it’s very interesting to see as people pivot in the COVID period, what kind of changes are happening. And like Chris said, it’s kind of a reset where you do have a chance to make some corrections and changes to membership fees. And that’s something that a lot of people notice that, OK, my rates were too low, but this COVID hiccup, to call it something, gives them a chance to make some corrections. And that can even come in the terms of cutting costs that maybe weren’t offering a lot of return on investment and different things. Did you find any other corrections that you could make because of COVID? In addition to that individualized programming?
Joe (07:13):
We did have to scale the staff back becase now we’re not running classes the way we were running before, and most of the staff had—I shouldn’t say most of the staff. We had a couple of trainers that had day jobs that they didn’t mind at all. So we just refocused the team down to a much smaller nucleus so that probably helped us a bit there. There you go. That would probably be the main thing where we saved some costs.
Mike (07:40):
- Talk to me a little bit about your retention. So you’ve got a high retention number, 41 months, and that very much influences the long-term value. Are there any special things that you do to keep members in the gym? I talked to a gym owner, Emily Cabral, another one of our long-term value leaders, and what she told me was she has an amazing personal relationship with each member. Her challenge of course, is to step back and not be the person and the icon in her business. But I’m wondering how you have achieved 41 months of retention.
Chris (08:13):
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Joe (08:46):
A combination of things. I’ve been with Chris, I started talking to him in the beginning of 2014, so all those old school concepts have been going on here for six years. So, you know, quarterly goal reviews, things like that. That’s all part of what we do here. In fact, we try to do them now monthly, trying to ratchet things up a little bit. But I think the long-term goal, because like, if I look at my LEG from back in August, I have like how many people is that? I have about 15 people that are over that 41-month mark driving my numbers up. So what we do that’s a little counter to what’s generally recommended is I’ve been in business for 12 years. There are people, that guy that’s been here 10 years, I’ve never raised my rates on him. So he’s paying the original, like been working out of the garage 10 years ago, 12 years ago, type of rate. I do constantly enhance services that we deliver. And when I do that, I raise the rates on incoming clients, but they’re getting the value there. Right. So they—does that make sense? I hope that makes sense.
Mike (10:13):
Yeah, it does. And it’s an interesting perspective because often when we do a rate increase, the mentors will recommend that they bring everyone up to the same standard and just have consistency across the board, but you’re taking a slightly different approach and you’re grandfathering or grandmothering as we either way you’re putting people in at those old rates. So does that, you think that has a retention effect where they see, because I did the same thing at my gym. We had, I want to say 10 or 12, and we did a rate increase. We had 10 or 12 original members, and these were the people that showed up with like $7 and 50 cents cash in their hands to pay me for a bootcamp I was running in a globo gym, and I didn’t raise rates on them because it was kind of a badge of honor for them. And I left them at a rate that was kind of half of what others were paying. And again, our mentor recommended that we didn’t do that. I did it only because I had a very small number and it diminished about three or four, but these are people that have been there for 10 years. And they gave me a chance when I had nothing. And so I kind of stepped outside for that. Do you find that this, your approach has some retention, value to it?
Joe (11:16):
Yes, I think so. Because, like I said, I’m looking back at some of these people and they were back when I first went to a public space, you know, I don’t have anybody from the—well, I have that one guy from the original garage days, but those people still bring people in, too. Right. So that guy that’s been with me 10 years, his wife joined like three years later and she actually upgraded to a much higher membership off of that you know, a few years later when she had some health issues. So, I think the benefit’s there. I mean, there are definitely people, I’ve seen some of the stories in the growth group about people and what their rates are and what their ARM is. And they started out too low. When I started, I was charging say, I was doing four nights a week out of a garage, right.
Joe (12:04):
So there’s only four classes, four one-hour classes, out of you know, a 220 square foot garage. I was charging a hundred bucks a month. That was a fair price for that. Right. But so if you stayed with me, you’d still have that price. But as I added more classes to the schedule, or I went to a public space that was bigger, went up to 150 and then added a few more days. We went from four days a week to five, six days a week, went up to 185 and then 200. And then we went to individual design when COVID reopened and that went way up. Right. So that’s kind of how we’ve been doing it, incrementally when it made sense, you don’t just kind of juice people. With the natural turnover of a gym, yeah. It drives it up.
Mike (12:52):
So if we talk about the average revenue per member and how it relates to long-term value, your long-term valu is probably supported, I’ll say more in the sense by length of engagement, but the burden of ARM falls more on your new members, is that correct?
Joe (13:11):
Yeah. But I mean—that would be correct. Yeah. But it averages out pretty smoothly as it goes, but yeah, the newer members and the new programs will bring the ARM up. For sure. If I had everybody at that original garage rate, I would have been out of business a long time ago for the services I’m offering now.
Mike (13:32):
That’s really the key that I want to get at is, you know, I’m not certainly—the mentors always have their formulas and they’ll help each person figure out the exact right path, whether it’s a consistency across the board thing that works in terms of a rate increase, or if there are some rare exceptions, generally we say, you know, the mentors will tell you do not do discounts. I certainly, I chose not to listen to that. And, you know, honestly, I eventually started to regret it a little bit when I was looking at my average revenue per member, but I really had to think like you did where these people have been with me for so long. So there are some ways to kind of adjust this, but again, I wouldn’t recommend, I’m not saying do this and, you know, do exactly what Joe and I did.
Mike (14:09):
You should definitely work with your mentor and find out the exact right plan for you. And there are formulas for this. So again, this is an interesting experiment, though. And the reason I kind of want to dig in is because you have one of these really cool scores. And so I kind of wanted to figure out what you’ve got going on in there. Do you think that number is going to change now, now that you’re paying attention to it? Is it something you’re to work to actively change? What do you think will happen to it?
Joe (14:32):
So no, I think if you chase the number itself, you’re going to run into problems, right? So, it becomes an objective. And so it’s like chasing a 500-pound back squat when really you’re in the gym for health and longevity, right? You’re going to end up jacking up your back and your shoulders and your hips and stuff, and you’d be tired and cranky. You’re not going to be producing at work. When I go back and look at why those numbers are the way they are, the result of, A, you know, trying to connect with members in different ways as far as the retention and, and honoring them, you know, you invested in me when we only offered X, so your reward for being here 10, 12 years is you’ve paid into the system for that length of time. I mean, do the math, if you’ve got somebody that’s paid a hundred dollars a month for 12 years, that’s a lot of money that you’re not going to see out of somebody that’s only going to be there 18 months. They’ve kind of paid their dues. Right.
Mike (15:36):
Yeah. And you kind of, sorry, go ahead.
Joe (15:39):
Go ahead. I want to hear what you have to say.
Mike (15:42):
Going to back to what we were talking about there with the keeping original members at their rates, it’s an interesting thing to kind of look at, because you can only do that when you’ve been around for a long time, essentially. And you know that like you and I both said, if we had kept, if we had not raised our rates on incoming members, we would be out of business. I wouldn’t have survived. You wouldn’t have survived. Right. Cause a hundred dollars a month rate and mine, I think it was 84 originally. Those would not have worked. And even in, I want to say in 2012, for me, I already realized my rates were too low. Even the rates, not even my old school rates, but my rates that I had set randomly without the help of mentor, those were too low in 2012.
Mike (16:22):
And I didn’t correct them, I think until 2018. So we made some real mistakes there and we managed to survive and we did leave people at that number. We had, you know, like a small number of people, but they were essentially outside my area on calculations at that point. Right. And they were some of my seed clients. They were some of the people that were doing the greatest affinity marketing for me. So there was additional value in there like you said, but the point being, you have to stay around for a long time to be able to make these decisions. And if you don’t have the right rates in place for the majority of your members, you’re probably going to be in a tough spot. Is that accurate?
Joe (16:59):
Oh yeah. No, absolutely. Absolutely. You have to go do that perfect day. You got to figure out what you need to run the gym when you start your initial rate. Right. You’re starting to—I got lucky, you know, I actually had a small garage to run out of. So the overhead was very low, so that a hundred dollars made sense, and it was all gravy. But when I went to the public space, I said OK, I need to kind of keep paying the bills, plus the rent and now I gotta do, I have to have a CPA and you have to do all that work to see if it makes sense to you and crunch the numbers. And, you know, there were times when it was big in the Two-Brain community to like do that rate increase and you know, people had to write their letters and you saw those pains. And I went through the numbers and I said, well, what happens if I bring everybody up to where everybody else is, and just because of the normal attrition over 10, 12, whatever years, right? It didn’t make sense. It just wasn’t that big of a bump up percentage wise.
Mike (17:55):
And so that’s important right? You work through the numbers and you figured out what was right for your business. And that’s the part that I love. And that’s why we’re kind of doing this interview on long-term value is that the data says what you need to do, right? So you work through it and you figure out, OK, this isn’t going to bump the needle as much as something else, you focus on something else. That’s the whole principle of the Two-Brain Growth ToolKit, finding the thing that’s going to help your business right away. So I love that you said that where you looked at the data and ran the numbers, I kind of did the same thing where I said, if I got these like few number of people, if I leave them, no big deal, kind of look forward to that, but then get it right going forward for the new people coming in. And then if a new gym owner is listening right now, the idea of launch properly, and we have a whole founder’s club plan that helps gym owners figure out exactly how to price their services, how to get people in the business, how to reach break even and even profitability right away as fast as possible. It doesn’t have to be a guessing game anymore like back in the day, when you were in your garage, how did you come up with that original number? Was it just a guess? Because for me it was.
Joe (18:58):
Oh, you know what? That’s so long ago. Yeah, let’s just say it was a guess because I can’t think of a reason that I had beyond that at that point. I probably did, but I can’t tell you what it was.
Mike (19:15):
Yeah. Well, you know, so what I’ll extrapolate from our discussion here on, we got into kind of pricing and rates and so forth and rate increases, but what it really comes down to is, like I said, your long-term value number comes from a place of survival, retention and data where you’re analyzing things and figuring things out, which I love that you kind of know these things. Let me ask you this. Now that you know that you have a pretty good, you know, industry leading number for long-term value, does that change any of your decision-making with regard to say, you know, retention gifts for members or, you know, purchasing advertising or anything like that, does that change the way you think about it?
Joe (19:52):
No. With anything purchasing advertising, I’m taking a step back on that because everybody’s drowning right now with the shift in the market. So advertising is abhorrently expensive. I’m trying to run the gym higher value, smaller number of members right now. So I’m really poured value into the members to justify the rates we have and potentially raise them as time goes on. If that makes sense. Yeah. Instead of trying to like, just drag in 30 new members in January, I’d much rather get five that are going to stay with me for three years.
Mike (20:32):
- Let me ask you this. When things kind of calm down and maybe we’re back to a new normal, whenever that might be, if you know that a new incoming client is potentially worth X over the long term, does that give you any confidence in the new scenario in terms of what you would pay for the cost of a lead?
Joe (20:51):
Yeah, that’s a good question. That’s a really good question. I don’t know, man. People are so like everyone’s an individual and everyone has their own stuff going on. How long they last is tough. That’s really tough. I mean, yeah.
Mike (21:12):
Well, the reason I ask is that, you know, the old Netflix story, right, where Netflix knows that people stay for X months and are worth whatever the dollar value is. So they can afford to pay a fairly high price to acquire a client and they’ll lose for the first little bit, but then they’ll make it up as the client stays for longer and fulfills that length of engagement kind of thing. So it’s really interesting to think about that. And I know that the marketing guys like Mateo and John of Two-Brain Marketing, they really get you to look at those numbers. So I’m curious as we get through the COVID crisis, what that might do, and we’ll have to talk to you again about this, because right now I’ve asked Emily Cabral the same question, again, another one of our long-term value leaders.
Mike (21:51):
And she didn’t know either because she’s in Southern California in a saturated market where advertising is crazy. Right. So she was in a weird situation too, and you’re in a situation where it’s like, well, COVID, how do we deal with this whole thing? So it’ll be very interesting to see later on how that plays out, but I’ll ask you this about retention. In terms of like, do you do any gifts or, you know, Christmas cards or holiday cards, or, you know, 10 year anniversaries or five-year anniversaries, do you do any of that kind of stuff for retention for members?
Joe (22:19):
So not for retention. I mean, literally just as appreciation, we’re going to put something together for that ten-year guy. Other than that, I mean, we just try to be kind of decent human beings. Like before this, if you got sick, you would have gotten a message from one of my coaches and me, or one of the other coaches would have dropped a package of chicken soup on your front steps or something like that. Like just seeing if you need something, cause you’re all relatively local, you know, we’re just trying to be, you know, just good to people, right? Not, I’m not going to say, Oh, here’s a stress ball or something like that. To go back to your question before, however, like I’m really bad at like even printing up t-shirts, I get clubbed by my members all the time. They’re like, when’s the next t-shirt?
Joe (23:05):
Just lift your weights and stay out of the hospital. So one thing we are going to try to ramp up and we’re meeting about this next week is we’re just going to try to, because things have shifted and people coming in, we can’t have as much close contact as we did before, and we don’t really run on ramps, but we’re going to try to up the attention we give to new people coming in in the first 30 days, too. And just like an added value without upcharging them at all to help them get up to speed faster. And it’s something we did, you know, it’s basically an on-ramp, but can’t really do an on-ramp with this model. But to get them up to speed faster, more success, and just feel better, more integrated and less, a little lost, which I think we have a little bit with this model, but again, you don’t have that like, Hey, this is your coach for the next 12 classes kind of deal. If that makes sense, right?
Mike (24:04):
Yeah. It’s such a transitional period for everyone to try and figure out how to kind of navigate things. And you know, our business running the online model, we’re figuring out how to get clients into that. Right. Because we can’t do that. We can’t run on ramps, you know, it’s with a local government restriction. So yeah, it’s a fascinating time to kind of reconsider everything. Well, let me ask you this question. What would you recommend to a gym owner who’s starting to look at long-term value? And I know it was a number that you said surprised you, to find out that you had a really good one, but if a gym owner just, you know, randomly sent you a message and said, Joe, how would I start driving my number up? What would you tell that person?
Joe (24:42):
I would say don’t look directly at that number, look at the two components equally and what can you do that helps the client, right? That meets with your sort of mission, but also parallels what the client needs. Right? So adding more classes or giving them more attention, right. Doing more no sweat intros, like I said, we’re doing it monthly now. And they’re extended. They get an InBody scan and a consult with the coach. You know, that’s a half-hour long every month. Whatever that is, get that to them. And you’ll see those numbers go up, right. Don’t just chase that number.
Mike (25:24):
So it’s essentially the, you know, the help first model that Chris has talked about so often where you find out exactly how to help this client get to the goals and as a function of that great service and value that you’re providing, you’re going to see results both in retention and in average revenue.
Joe (25:42):
Absolutely. Yeah. If you just chase the number, you’ll break it, or you’ll break something in your gym, right? That’s like salespeople that are just chasing the sale versus a person that just wants to help you. And by that they make a living and the person. So you’ve created a win-win scenario, right, when you’re trying to help the person. Whereas if you’re just trying to sell them, that’s a problem.
Mike (26:04):
Let me ask you this. I want your perspective on this, that Emily told me, she thought that her retention and the relationships that she had, which were very strong, she felt like that came from knowing exactly who her ideal client was and attracting ideal clients, meaning she didn’t have a lot of, I call them fitness tourists who pop in for a couple months and check out. She found, basically replicated her seed clients and found that these the right clients sustained this long-term value number. Do you have a specific client avatar that you target and do you agree with her about that?
Joe (26:38):
I’m just looking kind of at the people that I got on my list that are nine, eight, seven years. And they’re also different in a lot of ways. And I know who I like to personally work with and my other coaches have their own sort of seed clients or concepts. I think it’s a good thing. I think for me, it’s work ethic, the people that come in and they want to take personal responsibility for their health and fitness, and it’s hard to like put them into a demographic. Right. Does that make sense? I have trouble. I think the seed client thing is good, but what I find to be my seed clients, it’s hard to market to them because it’s more of like a philosophy, work ethic. And it’s not like 40-year-old PhDs or something.
Mike (27:34):
- So it’s less for you about demographics than character, I guess we could say, what does that do for you?
Joe (27:40):
Yeah, that would be what I would say when I’m just scanning over the list as we’re talking here, that’s what I see are these people just want to come in and they’re no muss, no fuss. They come in and bust their butts and they just keep at it for years at a time.
Mike (27:56):
That’s interesting too, because often when I talk to people, they say, you know, I am looking for, you know, 30 to 50 year old people who are interested in weight loss or, you know, athletes of 20 to 30 years old or something like that. So that’s interesting. And it almost reminds me of one of the old CrossFit quotes, where we’re screening for character, you know, it’s those people that want—and you’ve been around long enough as a gym owner that you probably understand that one, but that’s really interesting where you’re looking for people of true grit, honestly.
Joe (28:22):
Yeah. That’s it man, you know. You don’t have to be a tough guy, but you gotta be able to like, you know, like, Hey, this is what’s important to me and I’m willing to work for it. I’m not here for the flash and pizzazz. I’m here to make a difference in my own life.
Mike (28:37):
- So you definitely know your ideal client. It just isn’t a certain age group or profession or something like that. Correct. That’s cool. And I’m sure that that does figure into your retention because people who have that character, that hard work, like you said, no fuss, no muss, no flash. They just come in and do the work. Those people are going to come in and keep doing the work. And there’s a bit of a built-in retention driver in those people because they have that character. That’s interesting.
Joe (29:03):
Yeah. Precisely. Yeah. You hit the nail on the head there.
Mike (29:07):
Joe, thank you so much for your time. I want to check back in with you later on and see how this all plays out as your long-term value, as you dig into that number. Will you talk to us again sometime?
Joe (29:17):
Absolutely. My pleasure. Thank you.
Mike (29:19):
Yeah. Thanks for being here. That was Joe Venuti on Two-Brain Radio. We track everything at Two-Brain and we just published Chris Cooper’s State of the Industry guide. This 84-page book is packed with data from over 6,000 gym owners. You can use it to make smart decisions, avoid mistakes, generate more revenue, and see where you stack up in the gym world. It’s hundred percent free and you can get it at twobrainbusiness.com/research. That link is in the show notes. Click it right now. I’m Mike Warkentin and I’ll see you next time on Two-Brain Radio.
